Back to articles page

Are all business Brokers the same?
By Stephen Wray, National President Australian Institute of Business Brokers - #68

Selling your business is one of the biggest decisions in your life. 
The first question you will have is, “Should I use a broker or sell the business myself?”

The answer is easy; you should use a business broker! (I'll discuss this further in another article - stay tuned.)

However the next question you ask is even more important, and that question is: “What broker should I choose and why?”

Sellers might go to the agent they perceive as the biggest, or the one with claimed overseas connections or the one with a glossy magazine. Or, the seller might choose the broker that gave the highest expected sale price.

Be warned not all brokers are the same!

Many vendors have forked out thousands after falling for a great pitch, or promises of potential buyers. These bad experiences make vendors suspicious of everyone in the industry, including the reputable organizations. For this reason we have created this article outlining some key points to help you tell the difference between a Good Broker and a Bad Broker.

A good broker will make you money and save you the hassle and headaches of the business sale process. A bad one will cost you time, and importantly money. If you qualify the broker carefully in the beginning you can save yourself many sleepless nights, and hard- earned dollars.

Tips for choosing the right broker

• Ask for references - then check the references
  
  
• Ask to see a copy of their license or certificate - never deal with an unlicensed person. It is illegal to act as a agent if you are unlicensed but this practice is still happening today
  
  
• Ask the broker listing your business if he is the actual salesperson that will handle the sale and if he/she is not be very cautious & wary of these listers
  
  
• Ask the broker how they determined the selling price
  
  
• Don't let greed influence you by listing with someone who quotes the highest selling price - If it sounds too good to be true, it usually is
  
  
• Meet them face to face - Never sign over the phone
  
  
• Ask how long they have been in business
  
  
• Contact a member of the Australian Institute of Business Brokers, to help you sell the business.

And… Beware of Bad Broker Tactics.

These are a few to be aware of:

A. The Ridiculously Low Commission Tactic

If the commission is low, you should ask yourself how can the broker make money from the sale on such a low commission? 99% of the time if the broker asks a large upfront fee for marketing and advertising then there is your answer; they are more interested in the upfront fee than the commission resulting from the sale of your business. If you read between the lines it is obvious they are not that interested in selling your business, rather in just listing the business. Note: 
Most reputable brokers also charge a upfront fee for service and advertising also, so refer to our tips to choosing a reputable broker.

B.    The Interstate Lister Tactic

There are companies that operate outside the state they are based and licensed in. They use listers - slick commission sales people - to list businesses mainly in the country area. These travelling sales people are normally not the actual broker, their job is to list and get out of town, and that is usually the last you will hear from them.

Some of these brokers might give an impression that there is an affiliation with well-known financial institutions, when in actual fact there is not.

Some gullible business owners also become influenced by the promotional material that is shown to them, referring to overseas connections and an incredible success rate in achieved sales.

Be aware that interstate brokers are not allowed to sell businesses outside their licensed area. So if you spend large amounts of upfront money with these brokers you will be setting yourself up for disappointment.

C.  And Unlicensed Brokers

This is scary stuff because these people do not hold the proper broker's license to sell a business. Always ask to see a copy of the license when you engage a broker, or check the Department of Fair Trading or department of consumer affairs in your state.

General Tips for Buyers and Sellers

If you are buying a business beware of these traps…

1. Not being honest with yourself about how much money or expertise you have for the business you want to buy.
   
   
2. Not thinking through the consequences of owning a business… taking over a new business, no matter how successful it is, will involve you spending considerable time and effort before you can relax and enjoy it.
   
   
3. Taking too much advice from family, friends and advisers and neglecting to think the situation through from your personal perspective.
   
   
4. Being too focused on purchasing a business in one industry or of one type without looking at the alternatives.
   
   
5. Not allowing for all the other expenses in addition to the price, such as the professional fees and stamp duties involved in the process.

If you are selling a business

1. Letting greed not logic influence you by listing with someone who quotes the highest selling price but doesn't support it with the facts tosubstantiate it.
   
   
2. Going with someone who quotes the lowest commission rate and again letting greed not logic influence you.
   
   
3. Taking your foot off the accelerator and not continuing to do the things that make your business great as soon as the business is listed because its about to be sold.
   
   
4. Boasting to a potential purchaser about how good you are (inferring that the business can only run with you there) during their inspection.
   
   
5. Not understanding and becoming frustrated with the sales process because it can be a long and harrowing experience and not always successful.

Why use an AIBB Member

• AIBB business brokers have the knowledge and experience to help you sell your business for the best possible price.
  
• The process of buying or selling a business can be time consuming and overwhelming. An AIBB business broker has the experience to ensure the process of buying or selling a business, is smooth and a win win situation for all parties. AIBB business brokers know how to properly value businesses and structure the marketing.

For both buyers and sellers, using an AIBB business broker will mean having an experienced, knowledgeable professional representing you in the transaction. You will leave the transaction confident that you got the very best price and the very best deal.

If you are seriously considering buying or selling a business don't take any chances, put the experience of an AIBB business broker to work for you.

The Australian Institute of Business Brokers is the peak industry body, which represents business brokers, and its purpose is to ensure a standard of excellence in the profession and to promote it through:

      •     A belief in and adherence to the highest standard of ethics.

      •     Demonstrated professional competence.

      •     A commitment to continued development of expertise and knowledge.

      •     A responsibility to the community, clients and to the profession.

To this end, members have adopted and as a condition of membership, agree to abide by a code of Professional Ethics.

We hope this article will help you in the sale or purchase of any business.

To search for a Licensed AIBB Member go to www.aibb.org.au

Mr. Stephen Wray
National President

Back to articles page